All language subtitles for 7. How to Trade Based on Bollinger Bands

Hello and welcome back to cryptocurrency trading masterclass by wealthy education and this video we'll

talk about and how to trade based upon Bollinger bands.

Now Bollinger bands are a very common indicator used in various markets around the world.

Pretty straightforward, really.

All they do is they measure volatility.

To give you an idea whether a.

Cryptocurrency or an asset in general is overbought or oversold.

So based upon, if you remember, statistics, two standard deviations.

From the.

I mean, so basically the idea is I thought my head ninety seven percent of all numbers fall within

this distribution and then once you get.

Outside of this range, the idea is much more likely for the market to.

Return closer to the medium, so if you remember the bell curve.

Pretty straightforward, and it is not a difficult indicator to use.

There are multiple different strategies, though, so come up here to the indicators and strategies

button.

And you can see on the built in, it's actually right away, you can see Bollinger bands, you click

on that.

And you'll notice me go ahead and zoom in a little bit, you'll notice that at least on trading view,

it is filled in.

Sometimes it'll just be three lines and you can change it to that if you would like.

That's that's fine.

But this is two standard deviations, meaning that it is more than twice as far from the middle line,

the average.

Than is typical.

This means that you are two standard deviations lower than the line, as is typical.

So this is a reversion to the mean type of scenario.

The middle line is the 20 simple moving average.

So it's the average price of the last 20 periods in this case, last 20 hours.

Now.

When you look at this.

There are a few things that you should notice and I will go ahead and switch over to.

Like a bar chart.

So prices actually went this high, but they closed here and we'll talk about that a little later.

But the idea is you can see the price had reached above the top and the idea is that you are more than

two standard deviations above and you should go back towards Norm.

The same thing can be said here you are two standard deviations below and you should go back towards

the norm.

Now.

Something to pay attention to is the moving average, the norm, as it were, when it's going basically

sideways, that means you don't really have a trend, you're just kind of killing time.

But when it starts falling like this, you are in a downtrend just as you are in an uptrend here and

here.

So in that scenario.

The easiest way to trade this is to simply use this as to which direction to go, recognizing that once

you get outside of the band, you are likely to have a pullback.

There are a couple of different ways that people will.

Use this, that's the most kind of like just straightforward explanation of it, but sometimes they

will use the trend right along with the median to determine what what to do next.

So, for example.

We have a downtrend here and you can see the price falls and falls and gets a little overdone and we

bounce.

So if the trend is down and right here, an average pricing you are looking to sell, if you're a little

bit more aggressive, sometimes price might even jump up to here and a downtrend.

And you are definitely looking to sell at that point.

So that's the simplest way to to to talk about how to use Bollinger bands.

It just tells you when the market's gotten too far in one direction, especially when it's against the

overall prevailing trend, then you become very interested in it.

Notice how the standard deviations.

Are farther away here than they are here, and that's just a sign of volatility, whether the markets

are moving, you know, if they're just killing time, it gets slimmer.

You can see we shot straight up in the air.

And then they expand.

Because the.

Moving average starts to rise and it starts to be influenced by this outsized trading, our.

So notice how you're in an uptrend, you get overdone.

You can buy out the.

Moving average in the middle.

Also, notice how.

We break through here, we come up and we test this and then we fail again, that could be a sign that

the trends are about to change and it did, in fact, do so.

And then there's your other entry, so.

When they talked about being in a downtrend and selling here.

It made perfect sense.

Just as collecting profits might, once you get outside of the ball, undermanned.

But notice how.

If you took these trades to the upside.

You may have lost money there because it didn't return, it just kind of depends on when you get in,

but the fact that we failed, there is a huge sign that something's changing and therefore the trend

did exactly that.

So that's.

A way that you can.

Certainly take a look at it, you know, as support resistance, it's a dynamic support resistance level.

It operates the same way on all time frames.

I would postulate that, you know.

On the daily charts, it tends to be a little easier than, say, the five minute chart.

Once we start talking about candlesticks, this is a perfect setup.

Got a little overboard.

We're definitely in an uptrend.

We pull back, we form what is a buy signal on the candlestick a little later in the course.

And go higher, we break through it, we break through it, and then we finally make a decision and

once we make a decision, we're in a downtrend.

So that is a way to look at it.

So let's go ahead and take a look at REPL.

And let's put Bollinger bands on this.

See how wild it can get.

That's because the market is wild and now we have come back down.

A lot of times that's a news driven event.

So that's something to keep in mind as well.

You can trade inside the band.

OK, so let's take a look at this, let's drill down to maybe the 15 minute chart you can buy and sell.

So if you are flat and this is going to be for those who are like day trading, you know, OK.

So notice that we're essentially flat here.

You could buy, sell or sell, buy, sell, buy, sell by a lot of that's going to come down to the

spreads that you get and the like.

But you get the idea might be difficult to do in a penny range here with REPL specifically, but with

a coin, like a light coin or, you know, bitcoin or whatever, it would become much simpler.

You do have to keep in mind, though, that if you're in a longer term downturn, for example, your

selling positions will probably work out.

Better and then eventually you'll probably break to the downside, so you might go back and forth and

lose one, but you might win for is kind of the point.

So, again, this is back and forth.

You can see how well that worked when the bans tighten up and then they start to open up again and distance.

And that tells you that you're in the midst of a move.

Take a look at Catano.

Bollinger bands on.

And like I said, depending on the platform we use and we like trading view, but I recognize that not

everybody is going to use trading view, so.

You could do the background.

All the way to zero.

And then you'll notice that it's just three lines.

A lot of platforms actually do this.

It's a little easier to see what's going on in the inside.

But you can see clearly that Cordano started to break up of.

And then kind of drifted because it got a little ahead of itself.

Notice this year this is a Bollinger band squeeze and Bollinger band squeezes a lot of times will.

Proceed, some type of bigger move, I mean, a market when we sit still for so long and we actually

talk about this later in the course, but, you know, the skinny of it is it starts to lose volatility.

And then once it gets moving, you've changed directions.

You have formed a trend.

Multiple times you could have bought this right along the average price all the way up until here,

where you finally probably got stopped out.

For what it's worth, when you see this and this hasn't completely closed yet, this is an hourly chart

and as I record, this has got about 15 minutes left.

But if it starts to roll over here, that might be the beginning of a short term downtrend.

So that's something worth paying attention to as well.

Now, the thing that I would point out, that move that I talked about is in the presence of a higher

timeframe uptrend.

So, again, that's really the way you want to be as well.

So.

Bollinger bands are like a nice little guideline they adjust, meaning that.

We see them widen and shrink, the fact that we are overbought doesn't necessarily mean you mean need

to be shorting it in an uptrend.

It just tells you that you may get a pullback.

Or consolidation in this case going forward, so you can either take profit and do partial profit and

then perhaps wait for another opportunity to get involved, like you could have several times here.

The next video, we'll take a look at some examples, how to actually use Bollinger bands to play some

trades with with a little bit more clarity.